IDEAS home Printed from https://ideas.repec.org/a/ibf/gjbres/v4y2010i4p23-34.html
   My bibliography  Save this article

A New Hedge Fund Replication Method With The Dynamic Optimal Portfolio

Author

Listed:
  • Akihiko Takahashi
  • Kyo Yamamoto

Abstract

This paper provides a new hedge fund replication method, which extends Kat and Palaro (2005) and Papageorgiou, Remillard and Hocquard (2008) to multiple trading assets with both long and short positions. The method generates a target payoff distribution by the cheapest dynamic portfolio. The work here extends the work of of Dybvig (1988) to a continuous-time framework and dynamic portfolio optimization where the dynamic trading strategy is derived analytically by applying Malliavin calculus. It is shown that cost minimization is equivalent to maximization of a certain class of von Neumann-Morgenstern utility functions. The method is applied to the replication of a CTA/Managed Futures Index in practice.

Suggested Citation

  • Akihiko Takahashi & Kyo Yamamoto, 2010. "A New Hedge Fund Replication Method With The Dynamic Optimal Portfolio," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 4(4), pages 23-34.
    • Handle: RePEc:ibf:gjbres:v:4:y:2010:i:4:p:23-34
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/gjbres/gjbr-v4n4-2010/GJBR-V4N4-2010-3.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Akihiko Takahashi & Kyo Yamamoto, 2009. "Generating a Target Payoff Distribution with the Cheapest Dynamic Portfolio: An Application to Hedge Fund Replication," CARF F-Series CARF-F-308, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Feb 2013.
    2. Akihiko Takahashi & Kyo Yamamoto, 2009. "Generating a Target Payoff Distribution with the Cheapest Dynamic Portfolio: An Application to Hedge Fund Replication," CIRJE F-Series CIRJE-F-624, CIRJE, Faculty of Economics, University of Tokyo.

    More about this item

    Keywords

    Hedge Fund Replication; Dynamic Portfolio Optimization; Martingale Method; Malliavin Calculus;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:gjbres:v:4:y:2010:i:4:p:23-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.